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NEW - In 2016 the 2-4-8 Tax Blend will become 2-4-8 Tax Choice
The "choice" would allow all taxpayers to choose an income tax rate between 8% and 28% paired with a net wealth tax rate of 2% going down to zero. Wealth taxes paid would reduce Estate and Gift taxes (also set at 28%). This would encourage wealthy individuals to pay some net wealth taxes as a form of inexpensive life insurance.


C - Corp
4% VAT
8% Income

Reuters, Feb. 8, 2012

Mark Zuckerberg and the case for a wealth tax

by Felix Salmon

Mr. Salmon opines:

... Zuckerberg’s $2 billion tax bill is only coming about because of a quirk in the way his Facebook equity has been structured: on top of his 414 million shares of Facebook, he also owns 120 million options. Zuckerberg’s shares are generating no tax bill at all; it’s only the fact that he’s exercising the options which is giving him $5 billion or so of taxable income, for this year only.

... If Mr. Zuckerberg never sells his shares, he can avoid all income tax and then, on his death, pass on his shares to his heirs.

... Personally, I think it would be much better idea if we simply implemented a small wealth tax, on top of income tax, for the very wealthy: last year I proposed that any wealth over $5 million should be taxed, annually, at a 1% rate. For someone with $5.7 million in wealth — that’s the top 0.1%

2-4-8 Response

Thank you Mr. Salmon and thank you Reuters for putting a wealth tax on the table. I believe that bold reform will not happen unless the media accurately reports that income, sales and even net wealth can be part of an expanded tax base to produce the same amount of revenue in a much better way. [I am opposed to using a wealth tax as a surtax only on the well-to-do].

At the risk of oversimplification, try to contrast a 30% income tax (the Buffet Rule rate) with an 8% income tax combined with a 2% wealth tax for each of the next 11 years. The latter combined tax would permit an individual to keep 22% more salary each year and tax another 2% of the amount not consumed for the next 11 years. If one saved the 22% for 3 years it would be like having a year’s take home in the bank on top of what might have otherwise been saved under a 30% flat tax rate (conservatively assuming the 2% wealth tax was offset by 4% investment interest).

In August of 2006, I made the following suggestion to the President’s Advisory Panel on Tax Reform: tax Net Individual Wealth at 2%, Consumption/Sales at 4% and Income at 8%. The exact same rates apply to the rich and poor. There are no different tax brackets, credits, and no favoritism. The three taxes would yield about $2.6 trillion per year (slightly [about $400 billion] more than the current combination of Income, Social Security, gasoline and other federal taxes and fees).

It is also important to consider that deductions such as mortgage interest are not needed because the homeowner would get the benefit of deducting the mortgage principal in computing net wealth. A similar benefit would apply to those with credit card and student loan debt. Over the years, as debt is paid off and wealth was accumulated, the taxes paid would obviously be a little more. The blend of taxes, taken together, is progressive even thought the rates are the same for all.

It is hard to imagine anyone that wouldn’t welcome a 2% tax on net wealth and a small 4% sales tax, in exchange for drastically reduced 8% individual income tax rate. Even the “fair and balanced” Bill O’Reilly (a/k/a the Factor) supports a national sales tax (of 3%) as a necessary component of tax reform. The concurrent elimination of social security, capital gains, estate and gift taxes; and a significant reduction of the corporate income tax rate to 8% should guarantee near universal support from social liberals and business conservatives alike (he defiantly stated as he waited for someone to find a flaw in the plan rather than the obvious lack of political will).

The 2-4-8 Tax Blend expands the tax base to achieve the lowest possible rates (while yielding about the same government revenue). Upward mobility is encouraged by lowering the tax burden on earned income. A corporate tax rate of 8% should also be a very big plus for job creation and the economy.

Eugene Patrick Devany, JD, MPA



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